Obama's Trigger: An Interview With Judy Feder

In his speech Wednesday night, Barack Obama did announce one major addition to health-care reform. "I will not sign a plan that adds one dime to our deficits – either now or in the future," Obama promised. "Period. And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize." He's talking about a fiscal failsafe. A trigger, if you will. The idea was recently explained in a paper David Cutler and Judy Feder wrote for the Center for American Progress, so I called Feder today to ask what, exactly, the president was talking about.

How does a fiscal trigger work?

The idea of a trigger is that one establishes in advance a target for savings in the system, agrees on measures that need to be achieved, track that progress as the program is implemented, and if shortfalls are found, then certain actions are automatically triggered in.

What are those actions? What happens when you pull the trigger?

David Cutler and I put forward a range of options and believe a menu should be specified in the legislation. That menu could include further reductions in Medicare or changes in the tax treatment of employer-based efficiency or a strengthening of a public plan to further competition with insurers.

And why do we need this? I thought the plan already had savings in it.

The reason that David Cutler and I have been so supportive of a trigger is that we are firmly behind the cost-saving measures that are in legislative proposals and on which there is enormous agreement to change the health-care delivery system. Payment reform, a value-based purchasing system, moving away from the overprovision of low-value and high-cost procedures, and rewarding providers for better care and management of chronic illness. There's work and experience showing those measures can achieve huge savings systemwide. David Cutler and Rand's Melinda Buntin estimated (pdf) the savings at $2 trillion over the next decade.

But CBO is very cautious about scoring those measures. So it's our belief that for scoring purposes, we can put underneath them a failsafe that guarantees CBO will score the savings.

So the idea is that those savings will appear, but since CBO won't score them, you basically give CBO something it can score that's of similar value?

Exactly.

A lot of columnists and commentators argue that the bill should be more aggressive on these measures. In particular, they say it should do more to move us away from fee-for-service medicine and towards some other form of payment. Are those priorities in there? Are we doing enough?

Oh my God. There's tremendous agreement around the need to have Medicare and CMS experimenting with payment mechanisms that reward practitioners for providing better care, with reducing fee-for-service payments for services that don't provide much value, and so you're moving towards rewarding things we do want and paying less for things we don't want.

But the bill doesn't go so far as, say, capitation payments for providers, rather than fee-for-service.

As we develop a stronger health IT system so we know exactly what's being delivered and the consequences, we can move towards something more like a capitation system because we'd have the evidence to do it right. Capitation done blindly doesn't necessarily give you more efficient care, but less care, just as fee-for-service doesn't give you better care, but more care.

So the idea is the bill lays the groundwork for these approaches?

Exactly. The value of the failsafe in backstopping this movement is that if we move now, the savings will be there in 10 years. And it has another consequence: Since stakeholders don't like the failsafe measures, it gives them an incentive to move in the right direction. The beauty of the failsafe is it should never have to be used.

Judy Feder is one of the really smart people on helath care reform. It is too bad she lost her bids for Congress, but if she has the ear of the Obama Admin, that is almost as good. The link to CBO scoring is very informative. The role it plays in the trigger proposals was not apparent before. Thanks.

As we develop a stronger health IT system so we know exactly what's being delivered and the consequences, we can move towards something more like a capitation system because we'd have the evidence to do it right.

How will that information sharing be achieved? I thought that the public plan option was the way we'd have access to the data necessary to these studies - can we do it with an entirely private insurance system?